US President Joe Biden talks about student loan forgiveness and support for college students and … [+]
In two separate decisions, judges in Kansas and Missouri have blocked implementation of varied elements of President Biden’s recent SAVE student loan repayment plan.
The Saving on a Valuable Education (SAVE) student loan repayment plan first rolled out to borrowers in August 2023, with a number of the key elements not taking effect until July 1, 2024. The plan aimed to cut back borrowers’ monthly student loan payment to simply 5% of their disposable income. The plan also allowed certain borrowers to receive debt forgiveness based on certain timelines.
A Judge in Kansas blocked the upcoming payment change that would scale back borrowers’ payments from 10% to five% of their income. Judge in Missouri has blocked the Department of Education from forgiving student loan debt under this plan.
The SAVE student loan repayment plan
The SAVE Student Loan Repayment Plan was touted by the Biden administration as providing relief to over 8 million student loan borrowers. SAVE is one in every of several income-driven repayment plans available to student loan borrowers today.
The plan has several vital features and relies on the older REPAYE student loan repayment plan.
The plan allows borrowers to pay as little as 10% of their disposable income as their monthly student loan payment. If their income is below 225% of the poverty level, their monthly student loan payment can be $0 monthly.
However, the plan also stipulated that starting July 1, 2024, the monthly repayment for borrowers with a bachelor’s degree can be capped at just 5% of disposable income – which might effectively halve the repayments for a lot of borrowers.
The repayment plan also features a debt reduction component. Like other income-driven repayment plans, the SAVE plan provides debt reduction for any remaining debt remaining after 20 years for undergraduates and 25 years for graduates.
An additional good thing about the SAVE repayment plan is that borrowers who start repayment with lower than $12,000 can have their debt forgiven after just 10 years.
These lawsuits specifically challenged the 5% payment income limit and the $12,000 debt forgiveness.
What this ruling means for student loan borrowers
It’s vital to notice that this ruling prevents two things: the upcoming change to the repayment plan’s disposable income level and future loan forgiveness. This ruling doesn’t exclude any borrower already enrolled within the SAVE plan, and it doesn’t change a borrower’s existing payment – which is currently set at 10% of disposable income.
Education Minister Miguel Cardona published a press release on Twitter/X, stating: “While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers – including more than 4 million borrowers who owe no payments at all…”
The Biden administration is predicted to appeal these rulings in the approaching days.
